CENTRAL INTELLIGENCE BULLETIN RDP79T00975A024100030001-0

Approved Foi^lease 2003/10/15 : CIA-RDP79TOO97^241O(S6OI)0t)

25X1

DIRECTORATE OF
INTELLIGENCE

Central Intelligence

Secret

j\}6,

24 March 1973

Approved For Release 2003/10/15 : CIA-RDP79T00975A0241 00030001-0

Approved Fo^lease 2003/1gg^^^rpDP79T0097^241 00030001-0

25X1

No. 0072/73
24 March 1973

Central Intelligence Bulletin

CONTENTS

EUROPEAN COMMUNITY : Movement away from dependence

on high agricultural support prices. (Page 1)

25X6

CHILE : Cabinet reshuffle will be difficult. (Page 5)

EUROPEAN COMMUNITY ; Outlook for new anti-inflation
program doubtful. (Page 6)

INDIA: Sharp protests over nationalization of grain

trade. (Page 7)

ILLEGIB

SECRET

Approved For Release 2003/10/15 : CIA-RDP79T00975A0241 00030001-0

Approved Fo^lease 2003/1 g/^^glg^DP79T00974^241 00030001-0

/EUROPEAN COMMUNITIES: The EC Commission ap-

peal's xncireas ingly committed, to moving the common
agricultural policy (CAP) toward less dependence
on high, surplus-producing support prices to which
the US has long objected.

The modest increase proposed this week for
1973-74 farm prices is a step in this direction.

The Commission’s proposals are intended to encour-
age livestock over grain production and to restore
the common prices disrupted by the recent changes
in exchange rates. They should also partially com-
pensate community farmers for rises in the general
price level. Although the Commission calls for in-
creases in support levels averaging at least three
percent, the increases in Germany and the Benelux
countries would be reduced by the extent to which
their currencies have appreciated.

The Commission’s particular price proposals
may face rough going next month in the Council de-
spite increasing sentiment in the EC for holding
down food prices and farm program costs. Italy op-
poses any increase in EC prices. France, on the
other hand, is under farmer pressures to demand
higher dairy prices than the Commission has pro-
posed. West German Agricultural Minister Ertlhas
said privately he could go along with the Commis-
sion proposals, but his support may ultimately de-
pend on getting Bonn to aid farmers by reducing
taxes on farm products. German farmers have al-
ready vehemently denounced the proposed prices as
completely inadequate.

Beyond the immediate debate on prices, the Com-
mission intends to get the Council to review the
entire CAP system later this year. In brief, the
Commission wants eventually to substitute di rect ^

24 Mar 73 Central Intelligence Bulletin

1

SECRET

Approved For Release 2003/10/15 : CIA-RDP79T00975A0241 00030001-0

Approved For^elease 2003/1 (SBGBlE-lbP79T0097^241 00030001-0

25X1

j Inc ome payments to farmers for part of the support
rHey now receive through market prices. Price sup-
ports have not sufficiently helped the small farmer
and have produced surpl
expensive to finance.

.uses that are increasingly

25X1

24 Mar 73 Central Intelligence Bulletin

2

SECRET

TpproveTPo^elease

wm

Approved For^ease 2003/^j|^^^g>^DP79T0097^241 0003000 1-0

jCHIIiE : President Allende's current cabinet re-

shufxX'e wi 1 1 be difficult.

Allende was already planning to work out over
the next several weeks a reorganization of his gov-
ernment that would further his program and reflect
the outcome of the congressional elections on 4
March. His major considerations were the divisive
struggle within his Popular Unity (UP) coalition,
the political role of the armed forces , and the ways
of dealing with urgent economic problems.

Although the cabinet’s offer to resign on 22
March may move up Allende's timetable, his several
previous cabinet reorganizations have been drawn-
out processes. The resignations probably were
brought on by the intensifying tug-of-war between
the Communists and the radical wing of the Social-
ist Party. As before, this will be the chief com-
plication in settling on a revised cabinet. Both
parties will hold plenums next week to make deci-
sions on leadership and policy priorities that could
determine their future relationship.

Allende wants the cabinet to include some buff-
ers against the strong contending pressures of these
two major coalition parties. The small parties that
served this purpose in the past were nearly wiped
out in the elections and are further weakened by in-
volvement in the larger UP struggle.

Military participation in the cabinet has pro-
vided a third force in the administration for the
past six months, but continuing it has become a sub-
ject of controversy. The armed services themselves
are divided over the issue, as are Allende's oppo-
nents. Within the UP, radical Socialists reportedly
are pressing for the immediate ouster of the military
ministers as the party's price for remaining in the
government. The Communists would like the officers
to stay, at least for a while, but neither they nor
Allende would be likely to let the UP disinte grate
over this issue. I

25X1

24 Mar 73 Central Intelligence Bulletin

5

SECRET

Approved For Release 2003/10/15 : CIA-RDP79T00975A0241 00030001-0

Approved Fo^lease 2003/1 (g]^f^^qpP79T009^fe)241 00030001-0

25X1

'EUROPEAN COMMUNITY ; Against a background of
accelerating price increases throughout the Community,
the EC finance ministers are considering a new Com-
mission proposal for a comprehensive anti-inflation-
ary program. The outlook for adoption, however, is
doubtful .

The program calls for a unilateral 20-percent
reduction in tariffs on industrial imports and for
concerted action on monetary and fiscal policies.
Noting that inflationary wage increases and rapidly
rising wholesale prices threaten to produce an even
greater rise in consumer prices in 1973 than last
year's six percent, the Commission is proposing
budgetary restraint in countries approaching full
employment and restrictions on consumer credit.

It is also urging investment incentives in countries
where unemployment persists, notably in Britain,
Italy, and Ireland.

The new Commission program suffers from the
same defects that doomed a plan put forth last fall.
The French vigorously oppose unilateral tariff cuts
as prejudicial to the Community's position in the
upcoming trade negotiations with the US. Even if
French agreement could be obtained, tariff reduc-
tions are unlikely to dampen inflation. Past ex-
perience suggests that exporters will raise their
prices or importers their profit margins. Prospects
for effective budget restraints are no more promising.
Since governments lack discretionary authority over
a major part of their budgets, cutbacks would have
to come in welfare, education, or infrastructure
programs, all of which are politically sensitive.

Lack of concerted action will aggravate member coun-
tries ' difficulties in controlling inflation.

25X1

24 Mar 73 Central Intelligence Bulletin

SECRET

Approved For^lease 2003/1 Cg^05;l^^P79TOO97^241 00030001-0

INDIA ; The government's nationalization of
the wholesale grain trade has evoked a widespread
protest by businessmen in the grain trading center
of Bombay, which was supported by businessmen else-
where in Western India.

Business came to a standstill in Bombay on
21 March as traders in foodgrains and oilseeds, as
well as other merchants, staged a one-day strike
to express their opposition to the take-over. The
move for a take-over was initiated by Mrs. Gandhi's
party last fall and has been accelerated by food-
grain shortages. Mrs. Gandhi is losing important
business support over the issue, but apparently has
decided to go ahead because the poor support the
take-over as a positive step to prevent hoarding
and further grain price increases.

The protesters claimed that the take-over will
result in the unemployment of more than 2.5 million
people involved in the grain trade, but this is
unlikely because the government probably will con-
tinue to use the staff of the existing privately
owned distribution system. The new system could,
however, reduce the incentives for growers to pro-
duce grain, particularly of the better grades. The
new government wholesale establishment plans to
purchase grain at prices well below the current
open market price. The larger farmers who currently
produce the surpluses thus may shift some land out
of foodgrain production next season.

For the present, the success of the govern-
ment's program hinges on its ability to take over
efficiently the functions previously performed by
the private trade in collecting and distributing
grain to needy areas. Despite the imposition of
levies on producers and the restrictions on trans-
port of grain, the government will find it very

24 Mar 73 Central Intelligence Bulletin

1

SECRET

Approved For Release 2003/10/15 : CIA-RDP79T00975A0241 00030001-0

Approved Fo^lease 2003/1 0glg£^^gJ^P79T009^ib241 00030001-0

difficult to procure grain at the low prices. More-
over, grain trading by the ill-prepared state gov-
ernments is likely to be inefficient, at least
initially. As a result, grain supplies to drought
areas, which appear to have stabilized at a low
level in the past month, ma y deteriorate further.

25X1

2 4 Mar 7 3 Central Intelligence Bulletin

8

SECRET

ApprovS^o^eIeas^roSnTJ7T5^7!!?r mrnrmmm

Approved Foftelease 2003/10/15 : CIA-RDP79T00975lo241 00030001-0

Secret

Secret